Texas growth not about low taxes

Updated 4:57 pm, Wednesday, August 27, 2014

Gov. Rick Perry says his pro-business policies have kept the Texas economy strong, but the state's growth is due mostly to the low cost of housing.

Gov. Rick Perry says his pro-business policies have kept the Texas economy strong, but the state's growth is due mostly to the low cost of housing.

Photo: Reed Saxon / Associated Press

Texas growth not about low taxes

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Texas Gov. Rick Perry is running for president again. What are his chances? Will he once again become a punch line? I have absolutely no idea. This isn't a horse-race column.

What I'd like to do, instead, is take advantage of Perry's ambitions to talk about one of my favorite subjects: interregional differences in economic and population growth.

You see, while Perry's hard-line stances and religiosity may be selling points for the Republican Party's base, his national appeal, if any, will have to rest on claims that he knows how to create prosperity. And it's true that Texas has had faster job growth than the rest of the country. So have other Sunbelt states with conservative governments. The question is why.

The answer from the right is, of course, that it's all about avoiding regulations that interfere with business and keeping taxes on rich people low, thereby encouraging job creators to do their thing. But it turns out that there are big problems with this story.

To see the problems, let's tell a tale of three cities.

One of these cities is the place those of us who live in its orbit tend to call simply “the city.” And, these days, it's a place that's doing pretty well on a number of fronts. But despite the inflow of immigrants and hipsters, enough people are still moving out of greater New York that its overall population rose less than 5 percent between 2000 and 2012. Over the same period, greater Atlanta's population grew almost 27 percent, and greater Houston's grew almost 30 percent. America's center of gravity is shifting south and west. But why?

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Is it, as people like Perry assert, because pro-business, pro-wealthy policies like those he favors mean opportunity for everyone? If that were the case, we'd expect all those job opportunities to cause rising wages in the Sunbelt. It turns out, however, that wages in the places within the United States attracting the most migrants are typically lower than in the places those migrants come from, suggesting that the places Americans are leaving actually have higher productivity and more job opportunities than the places they're going. The average job in greater Houston pays 12 percent less than the average job in greater New York; the average job in greater Atlanta pays 22 percent less.

People are moving to these relatively low-wage areas because living there is cheaper, basically because of housing. According to the Bureau of Economic Analysis, rents (including the equivalent rent involved in buying a house) in metropolitan New York are about 60 percent higher than in Houston, 70 percent higher than in Atlanta.

But why are housing prices in New York or California so high? Population density and geography are part of the answer. For example, Los Angeles, which pioneered the kind of sprawl now epitomized by Atlanta, has run out of room and become surprisingly dense.

However, as Harvard's Edward Glaeser and others have emphasized, high housing prices in slow-growing states also owe a lot to policies that sharply limit construction. Limits on building height in the cities, zoning that blocks denser development in the suburbs and other policies constrict housing on both coasts; meanwhile, looser regulation in the South has kept the supply of housing elastic and the cost of living low.

So the secret of Sunbelt growth isn't being nice to corporations and the 1 percent. It's about not getting in the way of middle- and working-class housing supply.

And this, in turn, means that the growth of the Sunbelt isn't the kind of success story conservatives would have us believe. Yes, Americans are moving to places like Texas, but, in a fundamental sense, they're moving the wrong way, leaving local economies where their productivity is high for destinations where it's lower. And the way to make the country richer is to encourage them to move back, by making housing in dense, high-wage metropolitan areas more affordable.

So Rick Perry doesn't know the secrets of job creation, or even of regional growth. It would be great to see the real key — affordable housing — become a national issue.